The present invention relates to electronic funds transfer instruments, and more particularly, to performing secure financial transactions over a public access network using checking and savings account funds.
With the increasing commercialization of the Internet, new methods of performing secure and verifiable payment transactions are desired. The most common methods in use today, for example, require a purchaser to enter credit card or non-PIN-based debit card information and send it, unsecured or secured by encryption, to a merchant. The merchant decrypts the card information and uses it to complete the transaction. This type of transaction is known as a Mail Order Telephone Order (MOTO) transaction. MOTO transactions are disadvantageous from a merchant standpoint, however, because they are costly and risky. A merchant's cost for performing a MOTO transaction may be 5% or more of the entire transaction amount. MOTO transactions are risky because the merchant has no idea with whom they are actually dealing. Because a personal identification number (PIN) is not required, the only authorization-type of check that a merchant can use in a MOTO transaction is to verify the mailing address given by the purchaser with the issuing card company's mailing address for the card number. Often, the merchant must pay a fee to the card company to be supplied with this mailing address information. Further, the merchant, as opposed to the card company, assumes liability for a shipment in a MOTO transaction if no address confirmation is obtained.
For example, for a debit card linked to a credit card account, a consumer does not need to enter a PIN when they have a Visa.RTM. or Mastercard.RTM. logo on their debit card. The transaction is performed like a credit transaction, but the funds are taken out of their checking account. That transaction goes through the Visa/Mastercard credit network, and as a result the merchant pays the 5% or more discount fee because the transaction is treated like a credit card transaction even though it winds up being charged to a checking account. For the merchant, the transaction is settled along with other credit card transactions, with the settlement occurring usually the night of the transaction, or the following day. For the purchaser, the transaction may not be charged to their account for several days.
A second type of POS transaction utilizes the automated teller machine (ATM) network, making it a completely on-line and real time transaction. This type of on-line ATM/POS transaction is performed at ATM machines or merchant POS terminals directly connected to the ATM network. For this type of transaction, a purchaser dips or swipes their ATM, debit or check card, enters their PIN, and the network recognizes this as an on-line ATM/POS transaction and routes it through the same network that is used for ATM transactions. As part of that routing process, the network is set up to route the transaction according to a Bank Identification Number (BIN) included in a Primary Account Number (PAN), which is the embossed number on the card. The embossed number on the card is also stored on the magnetic stripe of the card, or for a smart card, within the memory of the microcomputer chip on the card. The BIN consists of the first six digits of the embossed number, according to International Standards Organization (ISO) standard number ISO 7812. Further, ISO provides the BIN numbers worldwide to insure that there is no duplication. The BIN tells the ATM network how to route the transaction so that it gets back to the purchaser's bank, and each bank that accepts one of these on-line ATM/POS transactions has a cross-reference between the embossed number and the actual account number. The on-line ATM/POS transaction creates an on-line authorization that verifies the card number and PIN, and determines if the card is lost or stolen or if the associated account is blocked. Further, the associated bank account is checked to determine if there are sufficient funds to cover the transaction amount. The transaction is then settled the same business day through the ATM networks.
An on-line ATM/POS transaction is beneficial to both the purchaser and the merchant. For the purchaser who would normally roll-over some or all of a credit card transaction, the on-line ATM/POS transaction is beneficial because it saves the purchaser from having to pay finance charges. For the merchant, an on-line ATM/POS transaction is beneficial because the cost to the merchant for this type of transaction is based on a fixed fee. The fixed fee is typically less than the percentage of the transaction amount charged for credit transactions, especially for transaction amounts over about $10-$12 U.S. dollars. Thus, on-line ATM/POS transactions are typically more desirable for the merchant for these dollar amount transactions.
Currently, the ATM network is not set up to handle the entry of a purchaser's actual account number into an ATM or merchant POS terminal and have that account number sent through the network. This is because the actual account number is not in the proper format and contains no routing instructions. Similarly, the ATM network cannot handle the direct entry of a bank's routing transit number followed by an account number, for the same reasons. Even though the BIN provides routing instructions, it is not the same number as a bank routing transit number, which is used to route paper checks, wire transfers and Automated Clearing House transactions. Thus, transactions utilizing merchant POS and ATM terminals are the only current methods commercially available for an on-line, real time financial transaction utilizing checking or savings account funds.
In an effort to expand the available sources of payment, methods have been developed to utilize checking account funds to perform Internet transactions. These methods allow the use of "electronic checks" to perform transactions. One example of such an electronic check is the "echeck" process established by the Financial Services Technology Consortium (FSTC). There are a number of problems, however, associated with current electronic check methods. For example, since the flow of the current electronic check replicates the flow used for paper checks, there is a delay between the time that the electronic check is endorsed and the time that the electronic check is approved for payment. This delay may be one or more days. For example, the electronic check transaction flow goes from the purchaser to the merchant to the check service provider. The check service provider issues a debit over the Automated Clearing House (ACH) network or the Electronic Check Processing (ECP) to the purchaser's account. The ACH or ECP debit may take a couple of days to get to the purchaser's bank, depending on how long the check service provider holds on to the money to gain float revenue. Also, there is the possibility that the ACH or ECP debit may be returned (like a bounced check) if there are not enough funds in the account. As a result, the merchant typically must wait a number of days to find out whether or not the funds are good, thereby delaying fulfillment of the order. As such, utilizing this type of electronic check creates uncertainty for the merchant, as they are unsure if the electronic check will be paid. Thus, despite the transaction having the appearance to the purchaser of being on-line and real time, it takes several days for their account to be charged and for the transaction to be completely processed.
Additionally, because the typical electronic check process replicates the paper check process, the transaction flow requires the merchant's bank to have the electronic check capability. For a consumer to be able to use this type of electronic check, however, the consumer must be a member of a bank or financial institution that offers this service. Over the next 5 to 10 years, however, only a few dozen financial institutions are estimated to participate in issuing electronic checks. Because of this limited participation, the majority of purchasers will not have access to electronic checks from the financial institution with whom they have an account relationship. Thus, in turn, the number of purchasers that a merchant can attract and serve with an electronic check is limited.
Additionally, for example, not only must the purchaser be a member of a participating financial institution, but the merchant must set up procedures for these types of transactions to deal with the limited number of participating financial institutions. Due to the limited number of customers who would utilize this payment method, a merchant may be discouraged from expending the time and money to establish such a system.
Another scheme requires the purchaser to deposit funds into a trusted third party's account before the purchaser can perform a transaction. This scheme is fraught with inefficiencies. For example, inefficiencies include the time wasted as purchaser must plan ahead in order to deposit the funds, and also the time wasted in finding a third party mutually trusted by the purchaser and the merchant. Thus, the use of trusted third parties is not desirable for on-line, real time transactions.
Further, with the Internet serving a worldwide market, there is a desire for allowing a purchaser using one currency to perform an on-line, real time financial transaction with a merchant using another currency. The ATM network discussed above allows this type of transaction to occur. For example, a United States citizen traveling in a foreign country can utilize their ATM debit card in a local ATM to get a designated amount of the local currency. The functionality exists within the ATM network to convert the amount of local currency obtained into a corresponding amount of United States dollars and debit the appropriate amount.
Currently, there is a need for low cost access to checking and savings accounts to perform financial transactions over the Internet. There is no current mechanism, however, that connects the ATM network to purchasers on the Internet. Most purchasers access the Internet from remote locations, such as personal computers at home or at a business. Meanwhile, access to the ATM network is typically provided only through ATM machines and POS merchant terminals directly connected to the network. Thus, there is currently no mechanism that allows purchasers and merchants using the Internet or electronic mail the real-time, on-line ATM/POS transaction functionality provided by the on-line ATM/POS transaction system.